In 1927 the great Austrian economist, Ludwig von Mises, wrote: “Whoever does not deliberately close his eyes to the facts must recognize the signs of an approaching catastrophe in the world economy.” He did not base his prediction of the Great Depression on specific economic policies, such as federal deficits, or improper money policy. It was based on the rise of philosophies antithetical to market capitalism and limited government, including fascism, socialism, and progressivism. The fist 100 days of the Obama administration have been marked by a similar movement away from belief in the market system and individual liberty and towards belief in a centrally planned state.

In his inaugural address, President Obama said: “[T]he question we ask today is not whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.” To the founders of this country, the question indeed was whether government is too big or too small. The 10th amendment makes it clear that the federal government has only enumerated powers that have been delegated to it by the states. That the Obama administration does not feel itself bound by limitations on its power has become obvious both by its actions and its statements. On April 7, the Department of Homeland Security released a report entitled "Right Wing Extremism: Current Political Climate Fueling Resurgence in Radicalization and Recruitment," defining as “right wing extremism” those groups “rejecting federal authority in favor of state or local authority.” Thus the administration has officially declared those who believe as Madison did, that “the powers delegated to the federal government are few and defined,” are right wing extremists and dangerous to the security of the United States.

Within the first month of Obama's inauguration, the Senate and House passed The American Recovery and Reinvestment Act, a 1000+ page document that was voted on within 14 hours of its drafting. The president, in arguing for the bill, declared that the market system was in a crisis that could only be resolved by government intervention.

The stimulus bill injects the federal government into nearly every corner of the American economy. Local school districts will now be funded by the federal government if they satisfy the plans of the federal Department of Education. As Education Week put it, “The requirements outlined by the department mark a notable foray by the federal government into several issues that have mainly been the province of states and districts.” The creation of a Federal Coordinating Council for Comparative Research directs the federal government in determining the most effective medical treatments, a method used by those countries with government health care to ration medical resources. A $650 billion carbon cap and trade tax along with subsidies for wind and solar energy will attempt to force the energy industry into one envisioned by the leadership of the new Congress and the President.

Further injecting itself into the health care industry, Obama has signed the State Children’s Health Insurance Reauthorization Act of 2009, extending taxpayer financed health insurance to children in families with incomes up to three times the federal poverty level. This is another step towards crowding out private insurance and creating one vast federal government health insurance industry.

The administration is now involved in running the domestic auto industry and hopes to regulate the entire financial industry. The automobile czar has deposed the CEO of General Motors and begun to replace its board of directors. The administration will direct the production of cars that the central planners would like us to drive rather than the type of cars consumers wish to buy. The administration is determining the pay of executives in the financial industry and Treasury is seeking the power to determine the pay of nearly all employees of those companies that took TARP funds. Firms, such as Goldman Sachs, that have awoken to the fact that government is taking over their enterprise will not be able to pay back the TARP funds.

The administration has converted its preferred shares in Citigroup to voting common stock, making it the financial company’s largest shareholder, and is suggesting it will do the same thing with the other major banks. Whether to call this action nationalization is a mute point. When the federal government owns a controlling share of the voting stock of the nation’s largest banks, the government has the power to control the entire credit market.

Treasury Secretary Tim Geithner has called for the power to extend federal regulation for the first time to all trading in financial derivates. The administration will create a regulator to monitor the largest institutions and wants the authority to take over major nonbank financial firms such as insurance firms and hedge funds. The Environmental Protection Agency has declared that it has the ability to regulate carbon emissions. This effectively gives it the ability to regulate much of American industry -- transportation, manufacturing, and energy production at a minimum.

Aside from injecting itself directly into much of the economy and substituting central planning for market outcomes, the administration has not found any limitation on its ability to spend. The president signed an omnibus spending bill of more than $400 billion to increase the federal deficit for 2009 fiscal year to $1.75 trillion, three times larger than the prior largest deficit. His 2010 budget of $3.552 trillion will have a deficit in excess of $1.25 trillion.

The Economist, in its most recent issue, warned against calling Obama a socialist or a fascist. Yet if we accept a common definition of fascism as a system of private ownership of the means of production with government control, certainly the administration’s policies exhibit movement towards such a system. At the same time, if we define socialism as a system of government ownership of the means of production, then the Obama administration has moved us in that direction as well.

In The Road to Serfdom, Nobel Laureate Friedrich Hayek explained that socialism and fascism are really a common system based on the belief that central planning is superior to individual liberty and market capitalism. So it matters little whether the Obama administration is moving us towards socialism or fascism. It certainly is moving us away from market capitalism and limited government and towards central planning.

Truly disconcerting is that within 100 days of the Obama administration Newsweek had a cover story entitled, “We Are All Socialists Now,” and a recent Rasmussen national telephone survey found that only 53% of American adults believe capitalism is a better system than socialism.

Mises’s warnings about the 1930s need to be headed today. While many economists are concerned about the massive federal deficits and expansion of the money supply of the first 100 days, the real threat to the economy comes from the philosophy that has been expounded by the administration and the ranking majority in Congress -- that left to our own actions we will create financial ruin, destroy the planet, and be left without health care.

Their solution is to allow central planners of an unlimited government to guide our actions. This is the real threat to our liberty and our prosperity.

Dr. Wolfram is the William Simon Professor of Economics and Public Policy at Hillsdale College in Hillsdale, Mich. He also serves as an adviser to the Business & Media Institute.